Three Strategic Paths for WhatsApp

Reviewing the challenges for the short and mid term

WhatsApp went over the 1 billion customer base more than a year ago, reaching 1.2 billion just last February, but what should be their focus going forward?

(source TechCrunch)

Main strategic drivers

There are three critical aspects for an audience-based business that has clearly covered their pure “growth” phase:

• Keep growing. Of course WhatsApp should try to keep growing, as they can aspire to reach Facebook’s 2 billion base, but this mainly means competition with their own Facebook Messenger on their existing markets. And for new markets, particularly China covered with WeChat, this can prove difficult.
• Make sure not to lose the current audience. Current users can stop using WhatsApp.
• Monetize their existing audience. But the main point of any business is to bring profit, and growing the already huge base only drives costs if they don’t turn this into revenues.

There is nothing particularly new on this, it is a classical ARM strategy: Acquisition, Retention, Monetization. But leaving aside acquisition for a moment — given that the billion-plus audience is a success by itself — , what I think is really interesting is what are the main retention threats for WhatsApp and how WhatsApp plans to monetize their service.

Retention-wise, I don’t expect the need for communication in people to go down naturally, so the main risks in that space will come from:

• Users moving their communication actions to competing apps. And not only the obvious ones focused on messaging, but also new entrants in the social communications space covering different needs.
• Changes in broader behaviors that can impact the engagement from a mobile app-based offering like WhatsApp. The phone is currently the center of social life, and WhatsApp has positioned itself very strongly there, but what if phone becomes less relevant?

The monetization aspect is also tricky, given that WhatsApp is a free service with no advertising, which is the basic model from its parent, Facebook.

I have already covered these aspects in separate posts previously, but I think it is a good opportunity to bring them together and look at the three paths I believe they should put their focus on.

Remain relevant in the Social Communications Space

WhatsApp offering has been constantly evolving over time, as communication needs evolved with users.

Things that today seem indispensable, like photo sharing or groups, were not part of the first versions of this service.

And to remain relevant it is also important to pay attention to new customer expectations around their communication needs and how to address them in a way that makes sense within their current WhatsApp usage.

That is the reason behind the change in WhatsApp’s status feature, which has become another “SnapChat clone” by Facebook. I personally feel that the nature of “Stories” doesn’t fit the WhatsApp model. Simpler video sharing and filters make sense within the context of groups, but that does not require the “Status” broadcast option.

I talk about that in my post “Facebook and the Attack of the Clones”, in which I also cover how group video could be a relevant and appropriate feature to keep WhatsApp engagement in the future.

Don’t lose sight of the potential smartphone disintegration

I wrote some time ago about how industry drivers and changing consumer needs might drive what I call the “smartphone disintegration”.

In summary, new connected devices may eventually not only complement but in some cases replace the smartphone as the center of communications for users.

The biggest example at the moment is the ongoing battle for the living-room in which Amazon, Google and Apple are trying to control the interaction via their respective smart speakers: Echo, Google Home and the HomePod. All of them are offering communication options, and I expect eventually they will allow third party communication services too.

As this model is expanded to other devices (like connected watches, earphones, glasses, cars, etc…) the ability to engage with other people and keep an ongoing conversation will rely on being able to use that communication service across all your devices (or at least in some relevant ones).

That is what I discuss in “Is Multi-device the Achilles Heel for WhatsApp?”, because currently they only support a single device per user, which may have been enough until now, but pretty soon it will not.

Monetization via business segment

The initial monetization model in WhatsApp was around charging a $1 yearly subscription to users of the service, but that went away after Facebook’s acquired them.

And since a key message from WhatsApp to its users has always been that they will not show ads in the app, there needs to be another point for revenue.

WhatsApp has already stated that they will provide “tools that allow you to use WhatsApp to communicate with businesses and organizations that you want to hear from”, so it is clear monetization will come from charging businesses to access this extremely relevant channel. But not only WhatsApp is after this business, even Apple wants a piece too.

I cover this in my post “WhatsApp Business in Enterprise Messaging”, looking at some examples of big businesses that already use WhatsApp to engage with their customers, and how the control of the User Experience in the WhatsApp app can create a big differential, specially when compared to the poor experience from SMS marketing.